Qe Extension Welcome But More May Be Needed Later In The Year

Commenting on today’s MPC decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

"We welcome the MPC’s decision to increase the QE programme to £175bn. This should be sufficient for the time being, but in view of the risks still facing the economy, more may be needed later in the year.

“Although QE has helped to prevent a worse downturn, it is not yet fully effective. Money supply is not growing at an adequate pace, bank lending to businesses has recorded outright declines in recent months, and many viable small firms are finding it difficult to access credit.

“Recent positive developments in the economy do not guarantee a sustainable recovery and the productive sector is still very fragile. Signs of confidence must be nurtured as there are still dangers of a relapse. The risks of not persevering with an aggressive policy stimulus are much bigger than the risks of extending the QE programme.

“The MPC should raise the proportion of private sector assets that it buys.”